From my point of view, that was the best outcome
— How did you come to enroll at ICEF?
Even at school I was interested in math, and then got interested in economics as an applied version of it. Then I heard that my School Number 45 was linked with HSE, and started preparing to enroll. In year nine I took classes at the Economics and Managerial School (EMSh-2) where HSE students of economics and sociology taught classes.
I heard about ICEF at school, as lots of my friends were getting ready to enroll in it. In year 10 I started getting involved in nationwide economics and business Olympiads and performed quite well. Later, at an HSE event, I met Sergey Yakovlev and my mind was made up. So, when, thanks to the Olympiads, I got the chance to study at ICEF on a grant that fully funded the costs of my education, I found out everything I could about the place. Of course, I was drawn to the opportunity to study to international standards, in the English language, with a strong economics programme. And as soon as it became possible – I didn't even consider other options.
— Did any ICEF tutors influence your decision to go to the United States?
Of course. I had talked to Alexis Belianin several times (he was my degree work supervisor at ICEF), Maxim Nikitin (he graduated from Pittsburgh University and told me a lot about education there), and I spent a long time talking through my decision with Alla Fridman. Overall, I think that I spoke to everyone who taught at ICEF.
— Did you get ICEF tutors to give you references for enrollment?
Yes, I had some references from LSE, including from Rosemary Gosling, director of the University of London’s international programmes. I should note that after enrolling I was in touch with professors at Carnegie Mellon and they all said that the fact that ICEF graduates have University of London degrees is critical in enabling US universities to trust their academic results. But I would also say that enrolling in a PhD programme is always a very personal decision both by applicant and the institution to which they apply, especially when business schools are involved. Not that many people work and study at business schools and everything is visible. In my case, the key person who trusted and believed in me during selection was Richard Green (currently research dean at Carnegie Mellon, Tepper School of Business, where I studied) and I was glad that when I was reaching the end of my studies he said he had not made a mistake with me.
— When and how did you know you wanted a career in research?
That’s an interesting question, I should say that as soon as I made the decision to do a PhD, I had a vague thought that I might be doing it in order to get as far as I could in terms of economics, an area which really interested me back then (my interest in finance came later).
I remember when I first arrived at Carnegie Mellon in August 2007, we had a session led by Richard Green. It was the first time I met him and all the students. Richard said that he was glad to see us all, that we had made it through rigorous selection and that we were really serious candidates. He also said that the PhD programme is not ‘the most advanced degree in economics’ and shouldn’t be viewed as such. That made me seriously think about my motivation. A PhD is a long-term endeavor, and over time I realized that there were not that many people who start out on a postgraduate course who understand what academic research involves, and so two years are spent on adapting. I think that it was only by the third year that I had built up a sufficient basis of knowledge to understand what research involves and how I am so well suited to this sphere. Of course, I was glad I had made that decision. But I cannot claim that it was a conscious decision right from the get-go.
Every area of research is primarily a group of people who carry out research, it’s like a kind of ‘academic family’. These are people with common interests, who meet all the time at conferences and seminars. Over time you become a member of this family on a particular subject, e.g. on financial market microstructures. But until you have taken on that role, even at the most junior level, it is difficult to understand what academia involves.
— By ‘academic family’ you mean good terms, friends?
Not quite. People are in different universities, hundreds or thousands of kilometers from each other, but academics working in particular areas are in a constant dialogue. They all meet from time to time at major conferences. So you end up with a kind of ‘family’, whose members don't see each other all the time, but who constantly reference each other in articles. When I was a BA student, I thought: Right, I’ll write an article now, develop a model, and help the world understand. Now I look at research as less of an individual endeavor, and more as being part of a global dialogue involving dozens of people, and when I ‘say’ something in my work, I am not talking to an abstract ‘academic community’ but to actual people that I will meet at the next conference, understanding that I might have an impact on them.
This is the most interesting part of academic research, and at times it seems even more motivating than writing articles. It’s the thing that can help push research forward and it is difficult to recognize that at the beginning when you are only just at the stage of formulating your academic interests and choosing your subjects. At that stage it is difficult to find any commonality between yourself and a group of researchers in an area, but when it happens you already feel like you’re part of a team.
— How many conferences do PhD students manage to take part in?
The main conferences take place close to the end of their studies. In the last year I took part in five conferences, and three-to-four the previous year. In my third year I took part in one or two, and before them I never went to any. I also applied to various summer schools – after an experience at University of Chicago on computational methods. For four weeks it was led by Kenneth Judd, author of the best-respected book ever on numerical methods in economics. I found this first experience with people from other universities was really interesting. They each have their own traditions, modes of thought, teams. All these things have a considerable impact on how they distinguish themselves from each other, and involvement in various different conferences and other academic events significantly expands your horizons. Over the first two-to-three years you get really used to where you are and you start to feel that academic life is the same everywhere, but in fact there is a plethora of local traditions. Some universities are focused chiefly on mathematical models with a large volume of approximations and try to use them to study the entire world. Others prize logical constructions and use these to review a particular phenomenon under examination.
— What was your postgraduate dissertation about?
It was about trade and transaction costs on non-stock markets and information streams to financial markets. A PhD dissertation usually comprises three separate essays. In my case one essay was looking at information flow and the other two – transaction costs on non-exchange markets. The first comprised a theoretical and the second an empirical analysis. The second essay was co-authored with my academic supervisors Burton Hollifield and Chester Spatt. Burton was my main academic supervisor for all six years of my PhD, and headed the dissertation committee when I had to defend it. Chester worked as lead economist at the SEC (Securities and Exchange Commission, the US state body providing oversight over financial markets). Before and after that post he was a professor at Carnegie Mellon.
— And what markets are classed as non-exchange?
All corporate and municipal bonds (obligations) are traded on non-exchange markets in the US. Numerous derivatives are also non-exchange. They are distinguished by there being no centralized trading forum, so participants have to search for trading partners for sale or purchase manually. Banks and dealers need to be contacted, asked if they want to trade with your or not. This is where your dealer network has an impact on how non-exchange markets function: some agents have much deeper dealer networks than others. In my articles I looked at the impact of these networks on transaction costs between clients with each dealer. So we basically checked our ideas against empirical data and developed a theoretical model that makes it possible to study this phenomenon.
— Why did you choose University of Lausanne after completing your PhD?
Finding a job after completing your PhD is a very unpredictable thing. It’s like a kind of centralized job market for professorial positions: everyone meets at the conference in January and every candidate submits their applications to the institutions that interest them. There may be only dozens of places, fewer in finance, a few more in economics. I applied to finance positions only, although some apply to both. I applied to about 50 universities, and those applying in economics might have applied to 120. So after you’ve submitted your documents to these 50 or 120 universities, it is hard to say where you’ll be accepted and so on. Some universities might just not want to hire anyone at all that year, or they might be looking for people with a very particular skillset or academic interest. So I couldn't tell you what my first thoughts about Lausanne were. It was one of the 50 places I applied to. But it was a very good university, and there were people I knew of there. My research is in a kind of dialogue with other areas of research, on other markets, and one of these pieces of work was coauthored with a colleague who works at University of Lausanne.
— But still you had a choice to make between Europe and America, or were you really looking at other criteria?
No, that wasn't the choice that I had. When drawing up my ‘short list’ I emphasized universities where people were working in similar areas to me, and who I had met at conferences on market microstructure. But as I am myself from a US academic environment, I applied to a limited number of European institutions. Universities and schools in the Old World made up no more than 20% of the total. And the Department where I now work was formed mainly from people who had been professors in the United States, and were among the most ‘Americanized’ in Europe. I could have applied to a plethora of places but chose not to, instead applying either where I knew people or based on research interests. Perhaps, in another phase of my life, I might have acted differently, but this was important to me for my professional development.
— What responsibilities do you have at University of Lausanne?
— Everything is fairly standard there, just like everywhere for Tenure-Track Assistant Professor positions. The main task is carrying out research as each year there is a particular volume of teaching work. I teach English disciplines for second year MA students.
— What subjects do you teach?
This academic year I ran two courses: credit risk in fixed income instruments, and financial market microstructure. That was in fall, in spring I focus more on research.
— So by 27 years of age you became a university professor. Looking back, would you change any of the decisions you had made that got you to this point?
It depends when. Now, when I’ve managed to write a good dissertation on finance, I wouldn't change anything in the past. From my perspective, everything worked out for the very best. Before I did have some doubts, but life showed – as always – that it’s best to follow things all the way through. And I wouldn't start dissuading people who are preparing for PhDs straight after completing their Bas.
Nikita Krylnikov, for ICEF HSE
Interview on HSE portal >>>